Energy supply, stability needed to achieve GDP growth target: Economists

To achieve the GDP growth target set in the proposed budget for FY25-26, economists have stressed the need for ensuring adequate energy supply, stability and improved law and order.

In the new budget, the GDP growth target has been set at 5.5%. Although the target for the current fiscal year (FY25) was 5.25% at the beginning, actual growth so far stands at only 3.97% – more than 1 percentage point below the target.

Nevertheless, Zahid Hussain, former lead economist, World Bank's Dhaka office, said the target is achievable. 

"The growth will be higher in FY26; even the IMF has projected a higher growth than the government did," he said.

The economist noted that the forex situation will definitely be better than the outgoing fiscal's.

The growth target made in the proposed budget is achievable even though investment growth is low, he told TBS.

Explaining how, Zahid Hussain said, "The industries currently are not able to use their full capacity, they are using only 30-40%. Because they are not getting enough energy supplies. 

"For the mere 5.5% growth, not much new investment is needed. We just have to utilise our existing investments."

He, however, stressed that the government needs to ensure three things to achieve the target growth – firstly, uninterrupted movement of people and goods; secondly, businessmen's trust in government's policies; and finally, continued energy supply at any cost. 

"Even if the energy supply is maintained for six months, the economy will turn around," the economist said.

Mustafa K Mujeri, former director general of the Bangladesh Institute of Development Studies (BIDS) and former Chief Economist of Bangladesh Bank, opined that without political and social stability, adequate energy supply, and controlled law and order, production gets disrupted. 

At the same time, a stagnant investment environment worsens the unemployment situation. All these factors combined mean that without an improved investment environment, achieving the GDP target will be difficult, he told The Business Standard.

Mujeri said that in FY25, most sectors – including agriculture, services, and industry – have grown at rates lower than their respective targets, resulting in an overall GDP growth of less than 4%.

Commenting that GDP growth depends largely on whether the investment situation improves, Mujeri said, "Right now, the investment climate in the country is virtually non-existent. There's a lot of uncertainty, and both domestic and foreign investment have stalled.

"Where we once achieved 15% growth in private sector credit, it has now dropped to just 6–7%. Because investment has slowed, borrowing by businesses has also declined. In the current situation, forget new investments – retaining existing investments is a real challenge."

Noting that businesses are reluctant to invest in the absence of an elected government, Mujeri said, "No businessperson makes major investments for just one year. They plan for 5–10 years before committing. So during the tenure of an interim government, it's only natural that investment won't see significant growth. 

"Political and social stability are also critical factors for investment. Overall, unless a long-term elected government comes to power, investment stagnation is unlikely to improve. And this prolonged investment slowdown will worsen unemployment, as we're unable to create enough jobs."

Mujeri also noted that Bangladesh's economy may suffer due to global instability. 

"We don't control the changes happening in the global economy, but we're not isolated from it either. The more volatile the global situation becomes, the greater the impact we'll feel," he said.